Page 78 - Russia OUTLOOK 2023

5.0 Real Economy

Industrial production in Russia decreased 2.6% y/y in October of 2022,
following a 3.1% fall in the previous month and compared with market
expectations of a 3.8% decline.

It was the seventh consecutive month of falls in industrial activity, as output
went down for mining (-2.7% vs -1.8% in September); electricity, steam and air
conditioning (-2.4% vs -1.5%); manufacturing (-2.4% vs -4%) and water supply,
wastewater disposal, and the collection and organisation of waste (-7.4% vs
-7.5%). On a monthly basis, industrial production jumped 5.3%, following a
0.5% increase in September, according to RosStat.

There are continued problems in the timber producing regions of the
Northwest, in regions with an automotive industry and machine building, coal
mining, metallurgy (most of these face a loss of export markets and transit
bottlenecks) and now also in gas producing regions.

Siberia and the Far East are still doing relatively OK, with some notable
exceptions. But due to a lack of infrastructure and very concentrated
investments into a handful of big projects, there's a limit to how much these
regions can heat up as others cool down.

Importantly, problems with industries will not break regional finances just yet.
With some exceptions, most regions are on track to meet their plans for
corporate income tax receipts in 2022 (according to official numbers).

This is, however, to a considerable extent due to high receipts in H1. At the
end of July, the picture was much rosier still. Then nine regions had collected
less than 50% of planned corporate income tax, now 17 have collected less
than 80%.

Even if the situation still worsens before the end of the year, the federal budget
will likely simply increase transfers for now. But these problems will continue
and receipts – including personal income tax, which has been fairly stable so
far – will drop further in H1 2023.

78 Russia OUTLOOK 2022 www.intellinews.com